For the third day in a row, natural gas futures were higher early Wednesday as the recent cool weather was set to fade by the week, ushering in what is expected to be the hottest weather of the summer to date. The September Nymex gas futures contract was trading around $4.110/MMBtu at 8:45 a.m. ET, up about 8.5 cents from Tuesday’s close.
Bespoke Weather Services said long-range weather forecasts remained stable again Wednesday morning. The outlook showed next week as the “hottest week of the summer,” thanks to widespread 90s across the Midwest and East underneath a strong upper level ridge in the six to 10-day period. A couple of days next week are forecast to reach near daily records in terms of national gas-weighted degree days.
“Heat does come off somewhat as we reach the end of next week, but remains generally at or just above the five-year average,” Bespoke said.
Stronger winds also are still in the cards for early next week, but they may drop off by late week, according to the forecaster. Tropical activity remains “very quiet for now, but that lull should not last too much longer.”
On the supply front, production took another step lower, sitting at around 90 Bcf early Wednesday. However, revisions are common at the beginning of the month. Power burns, meanwhile, are coming in a bit weaker on a weather-adjusted basis, but there was nothing to skew the bigger picture of tight supply/demand balances.
“We are running out of ways to basically say the same thing every morning, which is that we simply do not have adequate supply at this time to alleviate concerns about heading into winter with an uncomfortably low amount of natural gas in storage,” Bespoke said.
Higher wind should help somewhat, but production is the variable that must see significant gains to balance the market. “Otherwise, we risk seeing higher prices, still.”
Thursday’s government storage report is expected to once again shed light on how tight balances are. EBW Analytics Group said the Energy Information Administration’s (EIA) weekly inventory report may disclose the smallest build of the natural gas injection season. Furthermore, it could kick off a multi-week expansion of the storage deficit versus the five-year average.
Over the next eight weekly reports, the storage deficit could climb by more than 65 Bcf, an undersupply increasing by an average 1.2 Bcf/d into mid-September, according to EBW. The swelling deficit could occur as the market becomes increasingly jittery about the prospect of entering winter with less than 3.5 Tcf in end-of-injection-season natural gas in storage.
“Seasonal demand declines may provide opportunities for natural gas to retreat, particularly if demand-destroying hurricanes develop,” EBW analysts said. “If production remains lackluster, however, upside pressure for natural gas futures may continue to build.”
Both Bespoke and EBW are projecting a sub-20 Bcf injection in Thursday’s EIA report. NGI modeled a 17 Bcf build. This would compare with last year’s 32 Bcf injection and the 30 Bcf five-year average build.
Crude oil futures were trading lower again early Tuesday, down about $1.28 to $69.28/bbl. RBOB gasoline futures were off about 1.5 cents at $2.255/gal.
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